Spousal IRAs: This Tax Season, Don't Forget Hubby

Funding an Individual Retirement Account for the 2011 tax year ahead of the April 17 tax-filing deadline? Don't forget your other half. If you're married, you can contribute to an IRA not only for yourself, but also for your husband or wife--even if your spouse doesn't have any earned income.

The latter is known as a spousal IRA. Here's how it works: As long as the higher-earning spouse has enough earned income and the couple files a joint tax return, the lower-earning spouse can contribute as much as $5,000 to an IRA, or $6,000 if he or she is age 50 or older. That means that, between them, a couple could set aside at least $10,000 for the 2011 tax year. If one spouse is age 50 or older, the maximum combined contribution would be $11,000 and, if both have hit that milestone, they could sock away $12,000.

As with many tax benefits, this one comes with complications. If the higher-earning spouse isn't covered by a retirement plan at work, the couple can contribute the full $10,000 to $12,000, no matter how high their family income.

But if the higher-earning spouse is covered by a workplace retirement plan, things get trickier. The lower-earning spouse's IRA deductibility is phased out if the couple's modified adjusted gross income for 2011 was between $169,000 and $179,000. Above $179,000, no deduction is allowed. Meanwhile, for the higher-earning spouse who is covered by an employer's retirement plan, his or her ability to deduct IRA contributions phases out if the couple's income for 2011 was between $90,000 and $110,000.

Deductibility is not an issue with Roth IRAs, since contributions are made with after-tax dollars. But here again, there are income limits. Eligibility to contribute to a Roth IRA for 2011 is limited if a couple had income above $169,000 and it phases out completely above $179,000.

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